The recent spike in the US crude inventory caused major oil futures to face south on Friday, giving traders something to worry about.
On Friday, the Brent crude, which rose to $43 earlier in the week, shed 43 cents or 1.05 percent to trade at $40.62 per barrel. On its part, the US West Texas Intermediate (WTI) crude dropped 61 cents or 1.58 percent to sell at $38.11 per barrel.
The performance of the market on Friday showed a weekly decline of 3.1 percent for the Brent crude and 3.6 percent loss for the US crude.
Earlier in the session, the market recorded gains as a result of rising road traffic, which boosted fuel demand. However, these gains were erased on fears that spiking COVID-19 infections in large consuming US states could stall the demand recovery.
In the latest round of information, cases have risen sharply in California, Texas and Florida, the three most populous US states with Texas Governor, Mr Greg Abbott, reversing the state’s reopening plan, ordering most bars to close due to the surge in infections.
Also, there is a significant risk of repeat outbreaks and lockdowns due to the decisions to reopen economies in major cities.
While the size of an production deal from the Organisation of the Petroleum Exporting Countries and its allies (OPEC+) that reduces 10 percent off normal daily production welcomed for another month, demand may yet fall even more as a second wave of COVID-19 pandemic will likely be more severe.
The global economic outlook has also worsened or at best stayed about the same in the past month and with a recession underway, it is expected to be deeper than earlier predicted.
The global economy is projected to decline by 4.9 percent in 2020, 1.9 percent below the April 2020 World Economic Outlook forecast, according to the International Monetary Fund (IMF).
The pandemic has had a more negative impact on activity in the first half of 2020 than anticipated, and recovery is projected to be more gradual than previously forecast.
The World Economic Outlook projected global growth at 5.4 percent in 2021.
“Overall, this would leave 2021 GDP some 6.5 percent lower than in the pre-COVID-19 projections of January 2020,” the report stated.
